L.B. Foster reported its 2011 first quarter operating results and although net income took a negative hit due to its acquisition of Portec Rail Products and the closing of its Grand Island, Neb., facility, sales and gross profit margins were up.

Stan L. Hasselbusch, L. B. Foster's president and chief executive officer, said, "Our performance in the first quarter, which is traditionally our weakest quarter due to seasonality, was negatively impacted by expenses related to the acquisition of Portec Rail Products, Inc., and to our Grand Island facility. The most significant of these costs, a $2.5 million charge to gross profit, is a non-recurring expense that relates to the requirement to write-up inventory purchased in an acquisition to net realizable value, which takes most of the margin away when it is sold. This negative adjustment has been completely flushed through our results in the first quarter and will not impact us the rest of the year."

Hasselbusch went on to say, "Our margins were not where we wanted them as they were negatively impacted by the Grand Island shut down, a weak precast buildings performance and a disadvantageous sales mix as distribution sales increased by 25% while distribution margins declined by 120 basis points. With regard to the Portec acquisition, we have moved past an intense 120-day integration period and are planning to continue these efforts for the remainder of the year. We continue to see many promising opportunities in the friction management and Salient product lines and are excited about the long-term prospects for these businesses. As we move through 2011, we expect to continue to experience a highly competitive market environment and we also anticipate significantly extended delays before a new transportation bill is passed, but we are optimistic that the overall economy is improving. Our bookings and backlog are very strong and we expect this strength to be reflected in our results for the remainder of this year."

L.B. Foster results by the numbers:

• First quarter sales increased by $35.1 million or 42.8 percent due to a strong sales quarter by Portec Rail Products Inc., as well as a 14.4 percent sales increase in the legacy L.B. Foster business.

• Gross Profit margin was 14.9 percent, 20 basis points better than the prior year.
    o The Portec Rail Products business contributed a gross margin of 21.7 percent, which, as expected, included charges from purchase accounting related asset step-ups.
    o The legacy Foster margins were lower than the prior year due to a weak first quarter in our precast buildings division, as well as unabsorbed plant costs at our Grand Island, Neb., concrete tie facility as a limited amount of production was concluded in the first quarter and we began dismantling the equipment.

• Selling and administrative expense increased $6.5 million, principally due to the inclusion of the Portec Rail Products results.

• First quarter net income was $0.7 million or $0.07 per diluted share compared to $1.8 million or $0.17 per diluted share last year. Factors negatively impacting net income for this quarter were:
    o The recognition of expense related to the sale of Portec inventory that was written up to fair market value as of the acquisition date resulting in increased cost of goods sold of $2.5 million ($0.17 per diluted share).
    o Acquisition related amortization and depreciation of definitive-lived intangible and tangible assets stepped up to market value of $0.8 million ($0.06 per diluted share).
   o LIFO adjustments were $0.4 million ($0.03 per diluted share) unfavorable compared to the prior year.

• Adjusted EBITDA was $6.5 million compared to $5.0 million in the prior year quarter.

• First quarter bookings were $163.8 million compared to $106.1 million last year, an increase of 54.4 percent. Excluding Portec, bookings were 27.3 percent higher than last year. At quarter end, our backlog was $237.1 million, 15.8 percent higher than the prior year (4.9 percent without Portec).